HIGH COURT OF ALLAHABAD
Commissioner of Income-tax
Behari Cold Storage (P.) Ltd.
IT Appeal No. 193 of 2004
SEPTEMBER 27, 2012
1. We have heard Shri Govind Krishna, learned counsel for the income tax department. Shri Krishna Agrawal appears for the respondent assessee.
2. This income tax appeal under Section 260A of the Income Tax Act, 1961 (in short the Act) has been preferred against the judgment and order dated 23.6.2004 passed by the Income Tax Appellate Tribunal (ITAT) in ITA No.227/Agra/2001 for the assessment year 1997-98.
3. The appeal was admitted on the following questions of law:-
“(1) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the reference made to DVO by Assessing Officer in the assessment proceedings is beyond the power of the Assessing Officer in view of the judgment of Hon’ble Supreme Court in the case of Amiya Bala Paul reported in 262 ITR 407?
(2) Whether on the facts and in the circumstances of the case the Tribunal order is not bad in law in view of the new provisions of section 142-A introduced retrospectively w.e.f 15.11.1972 in the Income Tax Act by the Finance Act, 2004 which empowers the A.O. to require the Valuation Officer to make an estimate of value of movable/ immovable property?”
4. The Tribunal has relied upon the judgment of the Supreme Court in Smt. Amiya Bala Paul v. CIT  262 ITR 407, in which the Supreme Court held that the Assessing Officer did not have power under the then existing provisions of the Income Tax Act, to call for report from Valuation Officer for generally computing the cost of construction of the house property constructed by the assessee. The Supreme Court held:-
“Clearly this section in terms can have no application to the assessee’s case. But can the assessing officer otherwise make a reference to a valuation officer for generally computing the assessee’s taxable income? The respondents say he can, and have referred us to sections 131(1) and 133(6) of the Act. Section 131(1) of the act is in pari materia with section 37(1) of the wealth-tax act and section 133(6) of the act is substantially similar to section 38 of the Wealth-tax Act. On a parity of our earlier reasoning, the power of the assessing officer under the sections 131(1) and 133(6) of the Income-tax Act is distinct from and does not include the power to refer a matter to the valuation officer under section 55A. Nor does the third section, viz., section 142(2), on which reliance has been placed by the respondents allow him to do so. Section 142(2) of the Act provides :
“for the purpose of obtaining full information in respect of the income or loss of any person, the assessing officer may make such enquiry as he considers necessary.”
The common feature of sections 133(6) and 142(2) is that the assessing officer is the fact-finding authority. It is his opinion on the basis of the facts as found on an enquiry conducted by himself which results in the assessment order. A report by the valuation officer under section 55A is on the other hand the outcome of an inquiry held by the valuation officer himself and reflects his opinion on the evidence before him. Such a report would not be the result of an inquiry by the assessing officer under the provisions of section 133(6) or section 142(2). It is true that the assessing officer is not bound by strict rules of evidence and a report of a valuation officer under section 55A may be considered by the assessing officer as a piece of evidence, if it is relevant (see CIT v. East Coast Commercial Co. Ltd. 63 ITR 449, 457 (SC)). However, the power of inquiry granted to an assessing officer under sections 133(6) and 142(2) does not include the power to refer the matter to the valuation officer for an enquiry by him.
Learned counsel for the respondents has however particularly drawn our attention to clause (d) of sub-section (1) of section 131 which provides, inter alia, that the assessing officer shall, “for the purposes of this act, have the same powers as are vested in a court under a code of civil procedure, 1908 (referred to as “the code”), when trying a suit in respect of the following matters, namely:-
“(d) issuing commissions.”
The court’s power to issue commissions is contained in sections 75 to 78 of the body of the code and order xxvi of the schedule to the code. Sections 76 to 78 are not relevant for our purposes. Section 75 which delineates the power of court to issue commissions says :
“75. Power of court to issue commissions.-subject to such conditions and limitations as may be prescribed, the court may issue a commission-
(a) to examine any person ;
(b) to make a local investigation ;
(c) to examine or adjust accounts ; or
(d) to make a partition ;
(e) to hold a scientific, technical, or expert investigation ;
(f) to conduct sale of property which is subject to speedy and natural decay and which is in the custody of the court pending the determination of the suit; and
(g) to perform any ministerial act.”
Order XXVI provides for the procedure for issuing commissions in respect of each of the purposes mentioned in sections 75. Thus rules 1 to 8 are in respect of commissions to examine witnesses, rules 9 to 10C are in respect of commissions for local investigations ; rules 11 and 12 relate to commissions to examine accounts and rules 13 and 14 pertain to commissions to make partitions. If at all the assessing officer could have issued a commission to a valuation officer it could only be under rule 9 which lays down that:
“Commissions to make local investigations.-in any suit in which the court deems a local investigation to be requisite or proper for the purpose of elucidating any matter in dispute, or of ascertaining the market value of any property, or the amount of any mesne profits or damages or annual net profits, the court may issue a commission to such person as it thinks fit directing him to make such investigation and to report thereon to the court:
Provided that, where the state government has made rules as to the persons to whom such commission shall be issued, the court shall be bound by such rules.”
Assuming that the valuation officer was appointed in terms of order XXVI, rule 9, it is not clear whether the report submitted by the valuation officer was in keeping with rule 10, sub-rule (1) which requires the commissioner not only to hold “such local inspection as he deems necessary” but also to reduce in writing the evidence taken by him and to return such evidence together with his report in writing signed by him to the court. If this were done then the report of the commissioner and the evidence taken by him “shall be evidence in the suit and shall form part of the record”. However, the court and any of the parties to the suit, with the permission of the court, may examine the commissioner personally “touching any of the matters referred to him or mentioned in his report, or as to his report, or as to the manner in which he has made the investigation”. The assessing officer in this case had made a reference under section 55A of the Act. This action cannot be supported by reference to section 131(1) of the Act read with order XXVI, rule 9, of the code since the consequences of reference to a valuation officer under section 55A of the Act and of a commission issued under section 75 read with order XXVI, rule 9, of the code are different. It is not, therefore, a case of correction of an error in mentioning the section by the assessing officer, an error which could be ignored by referring the action to the appropriate source of power.
Besides section 55A having expressly set out the circumstances under and the purposes for which a reference could be made to a valuation officer, there is no question of the assessing officer invoking the general powers of enquiry to make a reference in different circumstances and for other purposes. (see Padam Sen v. State of U.P., AIR 1961 SC 281 ; Arjun Singh v. Mohindra Kumar, AIR 1964 SC 993). It is noteworthy that section 55A was introduced in the act by the Taxation Laws (Amendment) Act, 1972, when sections 131(1), 133(6) and 142(2) were already on the statute book. Learned counsel for the appellant has correctly submitted that if the power to refer any dispute to a valuation officer were already available in sections 131(1), 133(6) and 142(2), there was no need to specifically empower the assessing officer to do so in certain circumstances under section 55A.”
5. The Income Tax Act was amended by Finance (No.2) Act, 2004 w.e.f. 15.12.1972 inserting Section 142A authorising the Assessing Officer for the purposes of making an assessment or reassessment under the Act, where an estimate of the value of any investment referred to in Section 69 or Section 69B or the value of any bullion, jewellery or other valuable articles referred to in Section 69A or Section 69B is required to be made, to refer the matter to Valuation Officer to make an estimate of such value and report the same to him.
6. Even otherwise we find from the order of CIT(A) that as against the cost of additional construction of the undertaken in cold storage, the assessee had disclosed the cost at Rs. 1,19,77,580/-. The DVO estimated it at Rs. 1,38,31,020/-. The DVO, thereafter, revised the office report valuing the cost at Rs. 1,29,13,272/-. The A.O. estimated the cost at Rs. 1,30,17,815/-. The CIT (A) found that the difference was only Rs. 1,34,638/- as the amount of Rs. 8,01,104/- was shown in the plant and machinery as glass wool, used in insulating chambers of cold storage.
7. In the aforesaid facts and circumstances both the questions of law are decided against the revenue and in favour of the respondent assessee.
8. The income tax appeal is dismissed.